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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Flextronics International Ltd was 1.54. The lowest was -6.71. And the median was -2.51.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Flextronics International Ltd for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 0.8804||+||0.528 * 0.9089||+||0.404 * 1.2015||+||0.892 * 1.0908||+||0.115 * 0.8469|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8708||+||4.679 * -0.0126||-||0.327 * 0.9747|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $2,450 Mil.|
Revenue was 7025.054 + 6528.517 + 6642.745 + 6723.934 = $26,920 Mil.
Gross Profit was 408.657 + 377.081 + 380.785 + 362.144 = $1,529 Mil.
Total Current Assets was $9,133 Mil.
Total Assets was $12,090 Mil.
Property, Plant and Equipment(Net PPE) was $2,115 Mil.
Depreciation, Depletion and Amortization(DDA) was $524 Mil.
Selling, General & Admin. Expense(SGA) was $838 Mil.
Total Current Liabilities was $7,209 Mil.
Long-Term Debt was $2,046 Mil.
Net Income was 152.899 + 138.903 + 173.887 + 42.975 = $509 Mil.
Non Operating Income was -5.067 + -2.584 + -44.009 + -55 = $-107 Mil.
Cash Flow from Operations was 363.179 + 387.414 + -81.169 + 98.153 = $768 Mil.
|Accounts Receivable was $2,551 Mil.
Revenue was 7183.442 + 6410.106 + 5791.125 + 5295.318 = $24,680 Mil.
Gross Profit was 398.619 + 368.423 + 311.035 + 195.657 = $1,274 Mil.
Total Current Assets was $9,693 Mil.
Total Assets was $12,817 Mil.
Property, Plant and Equipment(Net PPE) was $2,381 Mil.
Depreciation, Depletion and Amortization(DDA) was $481 Mil.
Selling, General & Admin. Expense(SGA) was $882 Mil.
Total Current Liabilities was $8,064 Mil.
Long-Term Debt was $2,001 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(2449.773 / 26920.25)||/||(2551.03 / 24679.991)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(377.081 / 24679.991)||/||(408.657 / 26920.25)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (9133.22 + 2114.681) / 12090.473)||/||(1 - (9692.923 + 2380.711) / 12817.037)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(481.163 / (481.163 + 2380.711))||/||(523.759 / (523.759 + 2114.681))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(837.961 / 26920.25)||/||(882.179 / 24679.991)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((2045.569 + 7208.722) / 12090.473)||/||((2000.694 + 8064.492) / 12817.037)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(508.664 - -106.66||-||767.577)||/||12090.473|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Flextronics International Ltd has a M-score of -2.52 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Flextronics International Ltd Annual Data
Flextronics International Ltd Quarterly Data